Marital Patterns and Income Inequality

Abstract

We use a simple structural matching model with unobserved heterogeneity to produce counterfactual marriage patterns of two kinds: counterfactuals that hold the match surplus constant across markets and counterfactuals that hold the joint utility constant. These counterfactuals allow us to decompose matching patterns into an intensive margin (who marries whom) and an extensive margin (how many and who remain single). We apply this approach to US data from 1962 to 2017 and show that marital patterns can explain about 1/3 of the rise in income inequality, the intensive margin contributing for 5%, the extensive margin for the remaining 95%. The extensive margin is itself driven for 2/3 by a change in the total number of singles and 1/3 by a change in the distribution of types among singles.